You've found the Piqua home you want and you're ready to take action, now what's you next step? Once you've made your decision, you must make a written offer to purchase to the seller, a statement of your intentions to buy the home based on certain terms and conditions, at a specific price. Here's how it works.
An offer covers purchase price, financing contingencies, date of closing, date of possession, contingency on the sale of another home, tax proration, length of time the seller is being given to respond to the offer, earnest money deposit, appliances or other items to be included in the sale, and inspections that will be performed.
The purchase price is the amount you are willing to pay and the seller is willing to accept. The financing contingencies designate the type of financing the buyer will be using - conventional, FHA, VA, or nonconforming. Conventional loans are usually the quickest loans to go through underwriting and close. FHA & VA loans usually take longer. The FHA & VA appraiser not only appraises the home, they also make sure the home meets FHA or VA criteria. If they find items that don't meet the criteria, they provide the lender with a list of conditions that need to be corrected. These items need to be corrected or the buyer will not be given the loan. With a VA loan, the buyer must also have VA eligibility. If you're considering a VA loan, get your eligibility certificate now. It often takes time to get the VA eligibility certificate, so get started on the process as soon as possible. Nonconforming loans are usually for buyers who have some blemishes on their credit. The interest rates and closing costs are usually higher and the loans usually take longer to process.
When the offer is contingent on the sale of another home, the buyer and seller must agree on the length of time the buyer will be given to remove the contingency in the event the seller accepts an offer from a buyer that doesn't have a home to sell. It is usually 24, 48 or 72 hours. This is the amount of time the buyer will be given to make the decision to go forward and purchase the home without selling their present home and within the terms of the contract, or to step aside and let the other buyer without a home to sell proceed with the purchase of the home.
Miami County uses a short tax proration which means the seller credits the buyer the real estate taxes from January 1 or July 1 to the date of closing. Then when the next tax bill is due, the buyer pays the entire bill because the seller has already given their share of the taxes to the buyer at closing.
After the buyer makes an offer, the seller is given a window of time to respond to the offer. The seller is usually given about 24 hours to respond, but sometimes a buyer asks for a quicker response. The buyer may need a quick answer because they will need to go onto a second choice home if an agreement cannot be worked out with the first seller. If the seller does not respond within the given period of time, the contract may be considered as rejected. If the seller's agent is unable to reach the seller during the time period or if the seller needs more time to make the decision, the time period can be extended if the buyer agrees to extend it.
The earnest money deposit shows the buyer is acting in good faith or earnestly making an offer. A larger earnest money deposit shows the strength of the buyer. If the buyer does not get the loan or if the inspections discover habitability problems and the seller is unwilling or unable to correct the problems, the buyer can request a release of contract and may receive their earnest money back.
The buyer may ask for appliances or items the seller has not planned on leaving. These items are negotiated by the buyer and seller and may or may not stay. Sometimes the lender does not want these chattel items as part of the contract, so the contract may need to be rewritten and those items would be put on an addendum.
The inspection addendum lists the inspections that will be performed as part of the contract and the time period in which they will be completed. If habitability issues are found - leaking pipes, hole in the roof, etc., the seller is notified and given a period of time to complete the repairs or offer a sum of money for the buyer to make the repairs after closing. This can be done for most conventional loans, but if the buyer's loan is FHA or VA, the repairs need to be made prior to closing and the FHA or VA appriaiser has to go back to the property to confirm the repairs were completed before the loan goes to final underwriting.
An offer to purchase is a document that is not binding until accepted by the sellers. The seller may accept, reject, or counteroffer. When the seller gives the buyer a counteroffer, the buyer may accept or counteroffer back to the seller. While the buyer and seller are in this counteroffer stage, the seller may accept an offer from another buyer. So, if the buyer is considering a counteroffer back to the seller over a small amount of money or an unimportant item, they should ask themselves if they will regret not accepting the counteroffer. Will they kick themselves if another buyer comes along and takes it out from under them because they decided to counteroffer the seller instead of accepting?
There are many parts to a purchase contract and they are all important. Make sure you have an excellent negotiatior working for you. It makes all the difference.
